Monday, December 21, 2015

Iraq’s Parliament Passes 2016 Budget Few Believe In

Iraq’s parliament just passed the 2016 budget. It was based
upon export figures and petroleum prices that few think are achievable. There
were also questions on how many lawmakers actually voted on it as well. All
together it was a procedural move to get the bill passed even though no one believes
the budget will work out how it was written.

On December 16, 2015 Iraq’s legislature voted
on the 2016 draft budget. It was for $89.75 billion
with $67.9 billion for operational costs like salaries and pensions, and $21.8
billion for investments. Most of that money will come from oil exports, which
were set at 3.6 million barrels per day selling at $45 per barrel. That
includes 3.05 million barrels from the Basra ports and 550,000 barrels provided
by the Kurdistan Regional Government (KRG). If those marks are met Baghdad will
be facing a $20.1 billion deficit. The problem was that none of those figures
are likely to be met, and there was also a move against the Kurds, which was apparently
ignored the day of the vote.

First, the budget was based up questionable oil estimates.
The southern fields and Basra ports are likely to hit 3.05 million barrels per
day in exports as it surpassed
that mark seven months out of eleven in 2015, but it may not be able to
maintain it as shipments always fluctuate due to things like bad weather. The
bigger problem is that the Kurds have been exporting all of their petroleum
independently since October. The KRG has signed a number of deals
with oil traders, which include advances, making it hard to extricate itself
from. Kurdistan also owes millions to oil companies, lenders, and their public
workers and does not trust Baghdad that provided inconsistent
payments in 2015. Together that gives little incentive for Irbil to agree
to another export deal with Baghdad, and a Kurdish member of parliament said as
much to Iraq Oil Report.

Second, international oil prices are plummeting and Iraq
sells its crude for less than the amount set in the budget. In November the
country sold a barrel of its oil for $36.42, the lowest price of the year.
There’s no telling when and if that might rise. This was well known amongst
members of parliament. Majid al-Tamimi for example, a member of the finance
committee said
that all of the budget’s oil and export figures were wrong and should have been
revised. The result should have been deeper cuts in spending, but those were
not made as economics rarely plays a role in the political deals that make up
the budget.

Third, there was a controversy over the voting procedures.
The night before the budget came before parliament there was a meeting of party
chiefs where State of Law (SOL) tried
to cut the KRG’s share of the budget from 17% to 13%. The list argued
that since Baghdad was paying the Peshmerga the region should not get as much as
it has gotten in the past. The real reason was because many members of SOL
oppose the Kurds’ independent oil sales and what to punish them for it. A
petition was passed, which was signed by 111 MPs to boycott the vote on the budget
until the Kurdish issue was resolved. When the budget came up however, only 21
MPs were recorded as not voting. That meant the party bosses or the speaker
might have passed the budget by ignoring the representatives who were
boycotting. That might have been the reason why several SOL lawmakers
complained about the speaker afterward.

The 2015 budget used similar faulty assumptions about
exports and the economy, and faced major difficulties as a result. A senior
official told Iraq Oil Report that only around 50% of what was projected in the
$102.5 billion budget for 2015 was actually spent. Not only that, but because
of the falling oil prices the cabinet allocated the money it had available
based upon what it wanted rather than following the budget. A similar situation
is likely to occur next year, as few parliamentarians interviewed by the press
believe that anything in the document will be followed through with. Rather it
was a formality that ignored not only the economic difficulties facing the
country, but many of the members of parliament as well that might have voted
against the bill.

IRAQ HISTORY TIMELINE

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About Me

Musings On Iraq was started in 2008 to explain the political, economic, security and cultural situation in Iraq via original articles and interviews. If you wish to contact me personally my email is: motown67@aol.com